The Limited Liability Company (LLC) is a popular entity structure for businesses starting in New York. The LLC provides personal liability protection and has the potential to save money on taxes. With our guide, you can learn how to form an LLC in New York without an attorney.
Unlike a sole proprietorship or partnership where the small business owner can be held personally liable for lawsuits against the business, the LLC is a separate legal structure, protecting the business owner’s personal assets.
Besides the liability protection, the Limited Liability Company provides several other benefits over the sole proprietorship, partnership, and corporation because of the multiple tax options, ease of administration, and management flexibility.
Steps to Form a New York LLC
Let’s break down the steps to complete the New York LLC formation process.
Total Time: 10 minutes
Step 1: Choose a Name for the LLC
The first step in forming a New York Limited Liability Company is to make sure the name you want is available.
It’s critical to do a name search before registering an LLC name, as the name of each LLC must be distinguishable from other entity names registered in the state of New York. The New York Division of Corporations makes it easy to search and verify if your LLC name is available. Here is more information on how to do a New York LLC name search.
In addition to the name being unique, the entity designator (identifier used at the end of the business name) must be either:
– Limited Liability Company
A comma may be used after the business name and before the designator. “Cowboy Cleaners LLC” and “Cowboy Cleaners, LLC” are both acceptable.
If there is a name you want to use but aren’t ready to form the LLC, the
Application for Reservation of Name can be filed to hold the name for up to 60 days. The state filing fee for a name reservation is $20, paid to the New York Department of State.
Before settling on a name, you may want to see if a domain name is also available in order to match your business name and website address.
Step 2: Appoint a New York Registered Agent
Every LLC in New York is required to have a Registered Agent. A Registered Agent will act as a central point of contact to receive legal documents, tax notices, summons, subpoenas, etc., on behalf of the LLC.
The basic requirements to be a Registered Agent in New York include:
– The agent must be a New York resident at least 18 years of age or a commercial Registered Agent service with a registered office in the state.
– The agent must have a physical address in the state (PO Boxes aren’t allowed).
– The agent must generally be available during normal business hours at the address provided to receive service of process.
Learn more about the requirements for a Registered Agent in New York
Any individual meeting the requirements can be the agent; however, the agent’s name and address become public record, and with that comes a loss of privacy. This is more important for some entrepreneurs, especially when doing business from home or still employed. Hiring a registered agent service like Northwest Registered Agent to be the Registered Agent will reduce unwanted phone calls and mailings.
Step 3: File the New York Articles of Organization
The paperwork to officially create an LLC in Kentucky is called the Articles of Organization. To submit the paperwork, either file online through the New York Division of Corporation’s website or download and mail the New York LLC Articles of Organization (Form DOS-1336-f).
When filling out the Articles of Organization, a few sections and terms can be confusing. Let’s go over a few of these sections to help get your LLC started right.
Opening Statement – This is an optional section where the filer states, ” THE UNDERSIGNED, being a natural person of at least eighteen (18) years of age, and acting as the organizer of the limited liability company hereby being formed under Section 203 of the Limited Liability Company Law of the State of New York certifies that:”
This just says the filer agrees the rest of the information in the Articles of Organization is true.
Purposes – This is an optional statement you can agree to or not that says the LLC is being formed “To engage in any lawful act or activity within the purposes for which limited liability companies may be organized pursuant to Limited Liability Company Law provided that the limited liability company is not formed to engage in any act or activity requiring the consent or approval of any state official, department, board, agency, or other body without such consent or approval first being obtained.”
Check the box if it applies or not and proceed.
Service of Process – In this section, enter the mailing address where the Department of State should send notices of lawsuits. This address doesn’t have to be in New York, but must be in the continental United States.
Some filers use a third-party service company to receive these types of notices on their behalf. These services must already be registered with the Secretary of State, and if you select “Select a Service Company,” a drop-down list with approved companies will appear for you to select from.
Most fliers will enter the location information for the LLC.
Related: What is Service of Process?
Service of Process – In this section, enter the mailing address where the Department of State should send notices of lawsuits.
This address does not have to be in New York, but it does have to be in the continental United States. Some filers use a third-party service company to receive these types of notices on their behalf. These services must already be registered with the Secretary of State, and if you select “Select a Service Company,” a drop-down list with approved companies will appear for you to select from.
Most fliers will enter the location information for the LLC.
Related: What is Service of Process?
Effective Date – The effective date section is optional.
You can choose to elect to have the LLC start immediately upon the filing of the Articles of Organization (which will happen without doing anything). If you want the LLC to start on a date up to 60 days in the future, select the “Check if Applicable box” and enter a date.
The main reason for delaying the LLC start date is when the filing is being done close to the end of a calendar year, and the business isn’t going to have any activity until the start of the following year. By delaying until the following year, one less business tax return will need to be filed.
Dissolution Date – This section is optional and provides the ability to set a date to close the LLC. Most LLCs will choose a perpetual existence (which is the default choice); however, some businesses (usually investment-related) will have a specific closure date.
To include this statement in your Articles, select the “Check if Applicable box” and the appropriate information.
Liability Statement – This optional statement is an indemnification clause that says, “The limited liability company shall defend, indemnify, and hold harmless all members, managers, and former members and managers of the limited liability company against expenses (including attorney’s fees, judgments, fines, and amounts paid in settlement) incurred in connection with any claims, causes of action, demands, damages, liabilities of the limited liability company, and any pending or threatened action, suit, or proceeding. Such indemnification shall be made to the fullest extent permitted by the laws of the State of New York, provided that such acts or omissions which gives rise to the cause of action or proceedings occurred while the Member or Manager was in performance of his or her duties for the limited liability company and was not as a result of his or her fraud, gross negligence, willful misconduct or a wrongful taking. The indemnification provided herein shall inure to the benefit of successors, assigns, heirs, executors, and the administrators of any such person.”
Basically, it says the LLC will protect the members and managers of the LLC from the operations of the business, provided those members and managers weren’t negligent in their duties and hold them harmless should there be a lawsuit.
Step 4: New York LLC Publication Requirement
Per Section 206 of the New York LLC Act, after the Articles of Organization are filed, an ad has to be published for six consecutive weeks in two local newspapers or printers. To meet the Newspaper Publication Requirement, both papers must be located in the same county as the LLC’s principal office, in addition to being approved by the County Clerk of the county where the primary office of the LLC is located. After the notice has run, the publisher of each newspaper will send a filing receipt for proof of publication (Affidavits of Publication of the Newspapers).
Once the affidavits have been sent to you, they will be mailed along with the Certificate of Publication and a $50 filing fee to the Division of Corporations. The Certificate of Publication has to be submitted within 120 days of the LLC being formed.
Estimated Cost: 250 USD
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You have a New York LLC. Now what???
Once the LLC has been formed, there are a few additional steps to take care of. Below is a list of the most common tasks.
Prepare a New York LLC Operating Agreement
The operating agreement is a document that governs the framework of an LLC. This document covers items like ownership rights, member responsibilities, how profits and losses are distributed, and more.
Most states do not require an LLC to have an operating agreement, but it is still worth considering. Without an operating agreement:
- The LLC could be subject to generic state rules that may be detrimental in the event of a lawsuit.
- Member’s personal liability protection may be diminished.
- Members may not fully understand their roles and responsibilities, which could lead to costly disputes in the future.
Obtain an EIN
The EIN or Employer Identification Number (also called a Federal Employer Identification Number or FEIN) is a unique 9-digit tax identification number assigned to a business by the Internal Revenue Service (IRS). Similar to a social security number for an individual, the EIN identifies business entities for tax purposes. The EIN will be needed to hire employees, open a bank account, build business credit, register for business licenses and permits, file federal and state taxes, and more.
There is no cost for the EIN when registering through the IRS. The number is available immediately when applying through the IRS website; however, you can also register by phone, fax, or mailing IRS Form SS-4.
Related: How to Apply for an EIN
Elect the LLC’s Form of Federal Income Taxation
One of the significant benefits of the Limited Liability Company is the tax flexibility it provides. When applying for the Employer Identification Number, you will choose how the entity will be taxed for federal income tax purposes. While there are some limitations, an LLC may be classified for federal income tax purposes as a:
- Sole proprietorship
While this may sound confusing, this refers to how the LLC is taxed, not the legal structure.
Related: How can an LLC be taxed?
By default, the taxation of an LLC is called pass-through taxation, which means the profits or losses of the LLC flow through to the members.
Single-member LLCs will, by default, be taxed as a sole proprietorship. The members can also elect to change the taxation to a C-corporation or an S-corporation.
Multi-member LLCs will, by default, be taxed as a partnership. The members can also elect to change the taxation to a C-corporation or an S-corporation.
In general, the difference between being taxed as a corporation and being taxed as a sole proprietorship or partnership is that the profits and losses are passed to the member’s federal income tax returns based on their percentage of ownership. As a result, the owner will pay self-employment taxes on all business profits. As an alternative, electing to be taxed as a corporation allows the members to take a reasonable salary and then pay payroll taxes. Any remaining profits are distributed and aren’t subject to payroll taxes, resulting in potential tax savings.
Before electing how your LLC will be taxed, consider talking with an accountant to assess which one will be best for you. Some tax elections, such as the C corporation, may be detrimental for some people due to double taxation.
Open an LLC Bank Account
Opening a bank account for your LLC is important for liability protection as the account separates the business’s funds from the member’s personal funds.
Several documents will be needed to open a business bank account, such as:
- A banking resolution is a document that authorizes the members to open a business bank account on behalf of the LLC.
- Copies of the original formation paperwork from the state showing the creation of the LLC.
- Driver’s licenses of the members.
- Occasionally, the bank will request a New York Certificate of Good Standing to prove the LLC is active and in good standing with the state.
Apply for Business Licenses and Permits
Depending on what your business does and where it is located, there will likely be various business licenses and permits needed before starting your business. Some common registrations include:
- Business License – Some cities require businesses to obtain licensing before they can start.
- Professional License – Certain services such as barbershops, accountants, salons, and others must be licensed.
- Sales Tax Certificate of Authority – To sell products and certain services in New York State, registration with the New York Department of Taxation and Finance will be necessary.
Get Business Insurance
Even with the liability protection of the LLC, business insurance is important to protect the business. The most common types of insurance include:
General Liability Insurance – covers damages owed and medical expenses for accidents that happen at your place of business.
Business Property Insurance – replaces damaged, stolen, or lost business property. This includes your physical business location, equipment, supplies, and anything else you used to run your business.
Business Vehicle Insurance – covers company vehicles and may also include coverage for personal vehicles used for business-related activities. Many personal policies won’t cover your vehicle if there is an accident while being used for business purposes.
Workers Compensation Insurance – mandatory in most states if you have employees, this insurance covers medical expenses that occur because of an accident or injury that happens to one of your employees while they’re at work.
File the Biennial Statement
LLCs are required to file a biennial statement with the New York State Department of State. The statement costs $9 every other year.
Common Questions To Starting An LLC In New York
How much does it cost to start an LLC in New York?
The New York LLC cost to start an LLC is $250, plus the legal notice publication.
The cost to file the Articles of Organization with the New York Division of Corporations is $200.
Additionally, a legal notice must be run in two local newspapers or printers. The cost of the legal notice will vary by source.
After the notice has run, a Certificate of Publication must be filed with the Division of Corporations within 120 days of the LLC being formed, along with paying the filing fee of $50.
Is there a yearly fee for an LLC in New York?
Every other year the Biennial Report and $9 fee must be paid.
How long does it take to start an LLC in New York?
LLCs formed online are processed immediately, while mailed-in forms can take up 2-4 weeks.
Do I have to pay to hire a registered agent?
No. Anyone can act as a registered agent, provided they are at least 18 years old, reside in the state, and are generally available to receive documents during normal business hours.
If I have an LLC, is a business license required?
It’s sometimes thought that the LLC and business license are the same, but they aren’t. An LLC is referred to as the business entity, which is how the business is organized to conduct business. A business license is an approval from a government entity to legally operate.
What is a Foreign Limited Liability Company?
A foreign LLC refers to an LLC that is physically operating in states outside of the state where it was formed. Physically operating means having a presence, such as having an office or employee in the state. The LLC will need to register as a foreign LLC in each state that the LLC plans to operate.
What is a Professional Limited Liability Company?
Businesses that require occupational licensing in New York, such as accountants, architects, veterinarians, etc., will want to file for a Professional Limited Liability Company (PLLC) instead of an LLC. Filing for a PLLC is very similar to that of the LLC.